Finders, Weepers

Mike Hofman was previously editor of Inc.com and a deputy editor at Inc. magazine, which he joined in 1996. The site was nominated for a National Magazine Award for Digital Media in 2010, and was named the best business website by Folio Magazine. In 2006, Hofman was part of a team of writers nominated for a Webby Award for best business blog. He lives in New York City.

The issue of finders is bubbling up again, this time at the state level. Finders are brokers who get a fee for introducing private companies to investors. The Securities and Exchange Commission has never issued a clear rule on when finders need a license and when they don't, which can leave a company defending an investment's integrity should something go wrong.

Now Texas has stepped into the breach. On July 25 the state legislature approved a regulation that would allow "celebrity finders" to accept a fee in return for introducing investors to entrepreneurs, provided the finders register with the state.

The term "celebrity finder" is actually a misnomer. It simply means people who are well-connected and powerful, not necessarily famous. It came into usage because the only thing that previously passed for finders law was a 1991 letter that the SEC sent to the singer Paul Anka, allowing him to act as a finder for the Ottawa Senators hockey team. The precedent has never been tested beyond that case. Texas's move to codify the Anka letter could lead to a patchwork of state regulations, but advocates for clarifying the rules are pleased to see even a little movement after years of inaction.